London new-build market stalls as sales collapse and construction slows

London’s housing market is entering one of its most uncertain periods in more than a decade. Construction has slowed to a crawl, developers are shelving projects, and buyers are shunning high-priced new flats that were once seen as the answer to the city’s housing crisis. The London new-build sector, once a symbol of growth and foreign investment, is now facing a sharp reality check…

Construction grinds to a halt

The number of new-build homes starting construction in London has fallen to its lowest level since 2010, according to CBRE. Twenty-three of the capital’s 33 boroughs recorded no new starts in the first quarter of 2025. Planning applications are also more than 60 per cent below their 2015 peak, according to Specification Online.

Developers blame rising costs, stricter building regulations and limited access to finance. In some cases, sites have been mothballed altogether. “You need to sell flats upfront to unlock the finance to get them built,” explains housing analyst Neal Hudson of Built Place. “Without committed buyers, the whole model collapses.”

Buyers turn away from London new-build flats

Demand has weakened sharply. Figures from the Land Registry show that just 19 new-build flats were sold across the capital in May 2025. Over the first half of the year, sales were down by almost a third compared with the same period in 2024 — the lowest level since the global financial crisis, according to The Negotiator.

Higher mortgage rates, combined with cuts to stamp duty relief, have left would-be buyers struggling to afford homes that often come with a steep price premium. Even high earners are finding it difficult to buy, with average London house prices now more than 13 times local salaries, according to ONS data.

The affordability trap

For most buyers, affordability is the defining obstacle. A typical first-time buyer in London now needs an average deposit of £124,000, based on Halifax data — more than double the national figure. Add soaring rents, which now average over £2,100 a month, and saving that amount becomes nearly impossible.

New-build homes also tend to be more expensive than older ones. Research by Investropa shows that buyers pay a premium of around £3,300 per square metre for a new flat. “It’s a product and a price point that is simply not attractive or affordable to the vast majority of London residents,” says Hudson.

Service charges add to the strain

Even for those who can afford to buy, high running costs are proving a deterrent. Leaseholders in new developments are spending an average of £3,900 a year in service charges, according to the Greater London Authority (GLA), while one in ten are paying more than £7,000. Analysts warn that these charges reduce resale value and can even make some homes unmortgageable.

David Fell of Hamptons says that buyers are increasingly sceptical of developments with “extensive amenities that come at a cost”. He adds: “Buyers don’t want to open themselves up to paying for swimming pools, gyms and concierge services they may never use.”

Policy shifts fail to revive confidence

In response to growing pressure, Mayor Sadiq Khan recently cut the affordable-housing quota for new developments from 35 to 20 per cent, aiming to entice developers back to the market. But insiders say that without a revival in demand, such moves may have limited impact.

The Building Safety Regulator’s stringent post-Grenfell standards have also added cost and delay. While few dispute the need for safer construction, the approvals process for tall residential blocks is slowing delivery even further — a particular problem for the London new-build sector, where most schemes are high-rise.

A market in limbo

With new starts falling and sales stagnating, the capital faces a paradox: weak demand today could lead to even tighter supply tomorrow. CBRE forecasts a shortfall of around 170,000 homes in London by 2027 if current trends continue.

To restore confidence, analysts say developers must adapt. Prices need to reflect local incomes, service charges should be transparent, and planning processes must become more efficient. Support for first-time buyers would also help.

Until those changes come, the London new-build market will remain stuck — squeezed by high costs, wary buyers and a planning system that can’t move fast enough to deliver the homes the city desperately needs.

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